Budget 2020: Major parties to duel on long, dusty road to recovery

The budget has exposed Coalition hypocrisy on debt and spending.

Illustration: Tom Jellett

The fact this week’s budget forecast puts the deficit at a whopping $67bn in four years tells us everything we need to know about how much the fiscal political debate in this country has changed. Gone are the days when the conservatives threatened to block lifting the debt ceiling, condemned the use of deficits to help with growth, and attacked the accumulation of more and more debt burdening future generations.

Four years from now we’ll have a $67bn deficit, if a vaccine is widely distributed by the end of next year, if next year’s growth exceeds 4 per cent and if unemployment doesn’t peak beyond 8.5 per cent. That is a delicate and unlikely threesome.

On Tuesday Josh Frydenberg handed down a record-breaking deficit of more than $210bn. National debt will balloon past $1 trillion in the years ahead, keeping in mind this government had already doubled the debt it inherited from Labor before COVID-19 even struck.

Who ever could have imagined a Coalition government would need to eat so much humble pie? However, it is gorging on it, without a hint of contrition for the criticisms it once levelled at Labor during the global financial crisis. Without embarrassment for premature printing of “back in black” mugs.

Yes, this COVID economic crisis is worse than the GFC. Much worse. But the spending principles adopted by Labor then are the same as those being adopted by the Coalition now. Even if the debt numbers being racked up leave what was spent during the GFC looking like chump change.

When the Treasurer was confronted with the obvious charge of hypocrisy on budget night, time and time again he pushed back at the comparison by pointing to failures with some of the spending programs Labor introduced during the GFC. Such as the fiasco of the pink batts home insulation scheme, which cost lives. It remains to be seen how well or badly all the dollars have been spent during this crisis. But, given the failures and loss of life within aged-care homes during COVID — in part because of federal government system failures, according to the aged-care royal commission — the chutzpah required to raise pink batts is off the charts. But what interests me most about this budget isn’t the hypocrisy on the part of the Coalition. It is the brewing standoff between our two major parties over how Australia should chart its way out of this pandemic, and the economic crisis it has caused.

Labor wants JobKeeper lifted back to the levels it was originally set at, expanded to include more casual workers, and pushed out beyond the end of March when it is due to wind up. The budget revealed the government’s intent to wind up the program, as had already been flagged. There is no money set aside in the budget to extend it. Equally, the government has already begun reducing JobSeeker payments, viewing them as an inhibitor to people currently unemployed getting back into work. Labor disagrees, wanting the Newstart rate lifted, possibly in line with JobSeeker’s current settings. This variation between the parties underpins their differing philosophical approaches to how the economy should be best supported to overcome the worst of the crisis, and how best to reduce unemployment levels back to pre-pandemic levels.

In short, Frydenberg’s budget revealed plans that rely on a business-led recovery. Labor, in contrast, wants government to do the heavy lifting. This will present an interesting contrast once the halo comes off the Coalition.

The Liberals may have lost their philosophical lenses when it comes to debt and deficits, but in a sense that was always a political charade anyway. The budget did include substantial amounts of tax credit and tax concession stimulus to encourage businesses to invest more and therefore (hopefully) hire more workers off the unemployment queues.

The youth wage subsidy has received most attention, but the asset write-off opportunities the budget has opened up are more substantial in monetary terms. And I can tell you tax and business professionals are astounded at how far the Treasurer went on Tuesday evening. In an entirely positive way. He clearly understands business.

Labor is left in an interesting position. Will it back all of these concessions for business, or switch to the politics of envy and attack the Coalition for giving too much to business and not enough to lower and middle-income families? So far Anthony Albanese has avoided the temptation to dive in too deep, instead exploiting failures in the budget to look after certain cohorts of the community: women over 35, families dependent on childcare, and older working-class men who will find it hard to compete for jobs in the post-COVID world. Without attacking business.

Finally, a minor funding cut in the budget that deserves being highlighted; the finer details within the budget documents reveal the Australian National Audit Office has had its financing cut by a few million dollars. When billions are being thrown around with little thought it is hardly a big “saving” to help the budget bottom line. Fiscal belt tightening hasn’t exactly been a theme of Budget 2020. More likely, the decision to cut its funding is a spiteful one. The Auditor’s office has been responsible for exposing all manner of inappropriate public policy decision-making processes by this Coalition government, including the sports rorts saga, which cost the Nationals deputy leader her frontbench role. If Scott Morrison or one of his praetorian guard didn’t have a direct role in that decision I’ll eat my hat. When parliament is diminished, the opposition consigned to irrelevance and processes such as Freedom of Information searches are thwarted, cutting an oversight body such as the National Audit Office is disgraceful. It will have a direct impact on the number of investigations the organisation can do each year, and it sends a warning message: if your findings hurt us, we will hurt you back.

Peter van Onselen is political editor at the Ten Network and a professor of politics and public policy at the University of Western Australia and Griffith University.